Liberty Property Trust keeps buying land, building warehouses

Spencer Soper, Of The Morning Call

It was an industrial wasteland.

The property once owned by Bethlehem Steel along Route 412 was left abandoned for years. Its promise was its quick access to Interstate 78 and proximity to downtown Bethlehem. A major drawback to residential, and retail investment in particular, was an adjacent sewage treatment plant.

But now the property is roaring back to life.

Global real estate firm Liberty Property Trust, one of the biggest commercial landlords in the Lehigh Valley, has spent $60 million on a sprawling 1.2 million-square-foot warehouse on the property. Now it just has to find a tenant.

Over the years, Liberty Property Trust has proved itself to be quite good at finding tenants.

Ever since I-78 sliced through the Lehigh Valley more than 20 years ago, the company in Malvern, Chester County, has been a behind-the-scenes force of industrial development that has transformed the rural landscape of Upper Macungie Township and now the brownfields of south Bethlehem.

Its formula is simple. It buys vacant land close to freeways. It builds warehouses and manufacturing space. It rents out the buildings to such companies as Home Depot, online retailer Amazon.com, cereal-maker Kellogg's and soap-maker Dial Corp.

Though they represent different industries, all of those companies have to ship a lot of products to big cities on the East Coast. The Lehigh Valley offers convenient access to a lot of customers, as well as adequate space for the modern, energy-efficient buildings that companies crave.

With its large portfolio of industrial space nearly full, Liberty Property Trust sees no end in sight to demand. As long as the tenants keep coming, it will keep buying land and building warehouses.

"I don't believe there's a better place to do business than the Lehigh Valley," said Bob Kiel, senior vice president. "We love this market."

The company began in 1972 as Rouse & Associates under founder Bill Rouse by building warehouse space in southern New Jersey. It first entered the Lehigh Valley market in 1980 and developed a relationship with the Jaindl family, turkey farmers and developers with vast land holdings.

Developer David Jaindl said his family has been doing business with Liberty Property Trust for nearly 30 years.

"Our relationship has grown through the many transactions we have completed together, but it has also grown in a strong sense of trust," Jaindl said. "When Bob Kiel … or any of the Liberty representatives commit to an idea or strategy, they follow through consistently."

In 1994, the Rouse & Associates went public on the New York Stock Exchange and changed its name to Liberty Property Trust. Rouse retired in 2002 and died of cancer a year later.

Today, Liberty Property Trust has holdings in 22 markets in the United States and the United Kingdom. Most of its industrial growth is focused in the Lehigh Valley.

At first glance, dropping $60 million to build a sprawling warehouse without having a tenant lined up seems like a big gamble. For Liberty Property Trust, there is no alternative. Its inventory is full and it won't attract new tenants without a building to show them, Kiel said.

When large companies look to relocate, they are often under tight timelines as short as two or three months. That's just enough time to customize a vacant building to suit their needs. Building something from the ground up in that short span is impossible, Kiel said.

In 2011, Liberty Property Trust executed a major shift in strategy. The company sold 32 Lehigh Valley office properties totaling 1.4 million square feet to focus on industrial development.

Corporate job cuts, increased telecommuting and a reduction in the amount of space each worker occupies left the office market soft. Office landlords were competing for limited tenants, often pilfering them from one another by offering to pay moving expenses and offering low introductory rental rates.

Liberty de-emphasized offices in favor of industrial properties. The company expects businesses to continue to leave the high taxes, labor costs and congestion of New Jersey for the abundant space and lower costs of the Lehigh Valley, Kiel said. And when they do, Liberty Property Trust will be waiting with modern, energy-efficient buildings close to freeways, he said.

The company's confidence in the Lehigh Valley for industrial real estate helped fuel its transformation, with investments that have attracted big companies that employ thousands of people, said Pete Reinke, vice president of regional development at Lehigh Valley Economic Development Corp.

"They were pioneers," Reinke said. "They saw that Interstate 78 would attract the logistics and distribution markets. They built a couple of buildings which grew into dozens of buildings. …

"We're known as one of the best warehouse and logistics markets in the country, and a lot of that is because of what Liberty Property Trust did. They've been committed to this market for more than two decades."